InsiderOnline Blog: September 2009

The Cartel opens next week in New Jersey. As we wrote back in July when we had a chance to see a preview screening, this is a great film that reveals why and how public schools have evaded accountability for poor performance. The film focuses on New Jersey, but it is relevant anywhere teachers unions exert political influence over school boards.

Congress is poised to increase the budget for its own internal operations by $4.7 billion over last year, reports Politico. That amounts to a 5.8 percent increase for fiscal year 2010. And no, the increase is not meant to account for any inflation: Between August of 2008 and July 2009, overall consumer prices fell 2.1 percent—the largest 12-month decline in nearly 60 years. So that means what? That Congress thinks it’s producing a better product these days?

The Politico story notes that repairs and deferred maintenance to Capitol buildings account for a large portion of the increase. Also getting significant increases, however, are the budgets for leadership offices, including that of Vice President Joe Biden, who is also president of the Senate (4.3 percent); Senate majority leader Harry Reid and minority leader Mitch McConnell (4.3 percent each); House Speaker Nancy Pelosi (4.1 percent); House majority leaders Steny Hoyer (3.9 percent); and House minority leader John Boehner (4 percent).

Looking for Hugh: The Capitalist Guidebook is a new book that uses fiction to make the case for capitalism. The author, Leon Weinstein, is a Russian émigré who says he was inspired to write the book after talking with a young college graduate who couldn’t understand why anyone from another country would want to live in the United States. Looking for Hugh is an adventure story in which two teenagers travel a group of fictional islands, learning about the different social and political systems they encounter. And they learn why capitalism produces results where other systems fail. This book might just make a great gift for anyone who lacks economic literacy and who isn’t inclined to delve straight into Thomas Sowell or Henry Hazlitt. And at 223 pages, it certainly won’t be as daunting as Atlas Shrugged.

Contrary to liberal expectations and recent analysis by the Congressional Budget Office, the Waxman-Markey global warming bill is not a vehicle for progressive redistribution of wealth, says a new study by economist Andrew Chamberlain. In fact, says Chamberlain, the bill would produce a massive transfer of wealth from poor households to rich households.

How so? The bill’s cap-and-trade scheme aims to reduce carbon-dioxide emissions by essentially imposing a price on them—which will raise energy prices for consumers. It is generally understood that poor households spend a larger proportion of their incomes on energy bills than do wealthier households. The bill attempts to cushion the blow of higher energy prices on low-income consumers with transfers funded by the sale of emissions allowances (essentially a license to emit carbon dioxide). But, under the bill, only about 20 percent of the emissions allowances are auctioned off. The rest are given away free. What’s more, the bill instructs rate regulators to make sure electricity consumers, rather than shareholders, receive the benefit of the free emission allowances given to electric utilities. The assumption that rate regulators can perform that task, says Chamberlain, has led the CBO to produce unrealistic estimates of the where the bill’s burdens fall. According to CBO, the bill will even give the bottom 20 percent of income-earning households a net boost in purchasing power of $125 per year.

According to Chamberlain, however, trying to ensure that rate payers rather than shareholders benefit from free emissions allowances is a fool’s errand:

[R]egulated electricity and gas utilities will face powerful microeconomic incentives to push costs forward onto consumers. And to the extent that utilities’ generation costs rise in response to increased consumer demand for low-emission energy sources, these incentives to recoup costs through rate adjustments will be even stronger. As is well known in regulatory literature, utilities frequently respond in complex, unpredictable ways to regulatory constraints, adjusting on non-price margins, inflating production costs, adjusting product quality, varying product reliability, cutting ancillary customer services, or shutting down altogether. … [I]n the actual regulatory world, it almost certainly will not be obvious to utility regulators whether a cost increase submitted as part of a routine proposal for rate adjustments is due to ordinary changes in business costs or to the impact of the new cap-and-trade scheme.

Dropping the unrealistic assumption that free allowances are not a handout to wealthy shareholders, Chamberlain estimates:

[H]ouseholds in the nation’s highest-earning quintile would profit by $604 per year on a net basis from the legislation. In contrast, the lowest-earning 80 percent of households would bear net burdens of between $31 and $512 per year, with the heaviest burdens borne by the three middle quintiles that broadly constitute the nation’s “middle class.” Under this assumption, the Waxman-Markey bill would effectively redistribute approximately $14 billion per year from the lowest-earning 80 percent of households to the highest-earning 20 percent of families in the nation.

The Gulag Collection, one of the few visual records of life in the Soviet Gulag, is now on public display at The Heritage Foundation.

Ukrainian artist Nikolai Getman spent eight years in a Siberian labor camp for the crime of being present when another artist drew a mocking picture of Joseph Stalin on a piece of cigarette paper. After his release in 1953, Getman began painting scenes from his time in the labor camps. He painted in secret for 40 years, and the result is a collection of some four dozen paintings vividly depicting the harsh life of prisoners in the Soviet labor camps.

The collection of paintings was publicly exhibited in Russia in 1993. Late in life, Getman decided that his paintings would be safer after his death if they were transported to the West. In 1997, the Jamestown Foundation helped bring the paintings to the United States, where they were put on display in the United States Congress. Getman died in 2004. Through the generosity of the Jamestown Foundation, The Heritage Foundation is now able to sponsor the first public display of the paintings in 10 years. The Heritage Foundation is exploring ways to find a permanent home for the Gulag Collection. The Gulag Collection will be open on weekdays from 9 a.m. to 5 p.m. through mid-November.

Believe it or not, there are some who argue that Congress doesn’t have the authority to cut off funding for organizations accused of violating federal or state laws. In response to videos showing employees of the activist group ACORN engaged in conspiracies to suborn mortgage fraud, bank fraud, tax fraud, and human trafficking in underage girls for prostitution, the House of Representatives passed the “Defund ACORN Act,” which prohibits the group from receiving federal grants, funds, or contracts. Last week, however, the Congressional Research Service released a report suggesting that the “Defund ACORN Act” might be an unconstitutional bill of attainder. The Supreme Court, in U.S. v. Brown, defined a bill of attainder as a “law that legislatively determines guilt and inflicts punishment upon an identifiable individualwithout provision of the protections of a judicial trial.”

In a legal analysis published by The Heritage Foundation, Hans von Spakovsky identifies a number of problems with the CRS analysis. In particular, says Spakovsky, the CRS analysis cites as precedent a case (United States v. Lovett) finding that a bill barring individuals from employment with the federal government because of suspicions that they were subversives is an unconstitutional bill of attainder. But it makes no sense, says Spakovsky, to draw a parallel between denying employment with the federal government and denying federal funding. “Nonprofits like ACORN,” says Spakovsky, “have no vested property or contractual right to receive federal contracts or grants.” He writes:

Under the mistaken legal analysis of the CRS report, Congress would have no legal authority to exercise its discretion on appropriations. Once federal funds were appropriated in an earmark or for any other purpose and dispensed to a particular organization, Congress would have no right to terminate that earmark or end the appropriation of those particular funds. Such a result is clearly untenable, and there is no statutory or constitutional basis for it. Such a rule would prevent Congress from deciding that organizations that have received federal TARP funds and have committed bad acts—be it waste, fraud, or abuse of contracts—could have their specific appropriations terminated absent a formal judicial proceeding. Unlike most contracting parties, the government would effectively be prohibited from choosing not to engage in business with an organization that had shown itself unworthy of trust.

While Americans understand that entrepreneurs are critical to economic growth, our national dialogue doesn’t include comprehensive discussion of policies that promote private sector, job-creating reform. This disconnect likely exists because there is currently no organized community advocating for policies favorable to entrepreneurship – and the Entrepreneurs’ Movement is intended to fill that void by giving entrepreneurs the voice they need.

In that spirit, “Build a Stronger America” will help business owners of all sizes form a collective force so that policymakers from coast-to-coast will consider their needs – and the needs of all entrepreneurs – as they evaluate new laws and regulations. We’re also offering entrepreneurs a chance to share their stories, connect with like-minded innovators, and discover more efficient ways of doing business.

The Congressional Research Service, reports Mary Anastasia O’Grady in her Wall Street Journal column, has reached a conclusion that’s quite a bit contrary to the coup d’état narrative that the Obama administration has been telling about the Honduran situation. In a report released in August, the CRS writes:

The Supreme Court of Honduras has constitutional and statutory authority to hear cases against the President of the Republic and many other high officers of the State, to adjudicate and enforce judgments, and to request the assistance of the public forces to enforce its rulings.

And:

Available sources indicate that the judicial and legislative branches applied constitutional and statutory law in the case against President Zelaya in a manner that was judged by the Honduran authorities from both branches of the government to be in accordance with the Honduran legal system.

In spite of this report, the U.S. State Department last week revoked the visas of 14 members of the Honduran Supreme Court. The move was apparently a retaliation for the court ruling that a compromise plan allowing Zelaya to return to power was unconstitutional. The U.S. heavy-handedness is enough to make O’Grady conclude:

In its actions toward Honduras, the Obama administration is demonstrating contempt for the fundamentals of democracy. Legal scholars are clear on this. “Judicial independence is a central component of any democracy and is crucial to separation of powers, the rule of law and human rights,” writes Ahron Barak, the former president of the Supreme Court of Israel and a prominent legal scholar, in his compelling 2006 book, “The Judge in a Democracy.”

“The purpose of the separation of powers is to strengthen freedom and prevent the concentration of power in the hands of one government actor in a manner likely to harm the freedom of the individual,” Mr. Barak explains—almost as if he is writing about Honduras.

He also warns prophetically about the Chávez style of democracy that has destroyed Venezuela and that Hondurans say they were trying to avoid in their own country. “Democracy is entitled to defend itself from those who seek to use it in order to destroy its very existence,” he writes. Americans ought to ask themselves why the Obama administration doesn’t seem to agree.

The Institute for Justice has asked the Supreme Court to review a case that could have major implications for non-profits seeking to educate the public about issues that are the subject of ballot campaigns. The Institute for Justice is representing Colorado’s free market think tank, the Independence Institute, which in 2005 became ensnared by the state’s laws regulating ballot measure campaigning. After the institute ran ads critical of two ballot measures that would have weakened the state’s Taxpayers’ Bill of Rights, a supporter of those measures filed a complaint alleging that the think thank should be required to register as an issue committee and report its finances and donors to the Colorado secretary of state. The complaint was eventually rejected, but not before the Independence Institute had spent $50,000 in legal fees and considerable time defending itself.

Fearing that such complaints would continue to arise whenever it spoke about issues that were the subject of a ballot measure, the Independence Institute decided to challenge the law as an unconstitutional abridgement of its free speech rights. The Colorado courts rejected those claims, and the Institute for Justice now wants the Supreme Court to review those decisions. The case is Independence Institute v. Buescher.

Health insurers are making too much profit and that’s why we need health care reform, say the Democrats. But if that’s true, then what do the Democrats have planned for such industries as beer, cigarettes, software, wireless communications, personal computers, cleaning products, and book publishing? All those industries and many more—85 in all—have higher profit margins than health insurance, according to data from Yahoo finance. Brewing beer has a whopping 25.9 percent profit margin; health insurance only 3.3.

Profits of $13 billion sound like a lot, but Andrew Biggs points out: “[A]ny large industry will generate significant profits simply by virtue of its size, even if its profit margin is small. Yet the margin is what matters. Large industries divide profit among millions of investors, each of whom is seeking a decent return on his money.”

Yesterday, the new Breitbart Web site Big Governmentbroke more corruption news by releasing an audio recording and transcript of a controversial conference call that took place in early August between officials at the National Endowment for the Arts, the White House Office of Public Engagement, the Corporation for National and Community Service, and various people in the arts community who had supported President Obama’s campaign. When the story of the call first broke a few weeks ago, the NEA denied that it had organized the call and also denied that the call was an effort to encourage artists—for whom the NEA (i.e., the taxpayer) is the single largest source of arts funding—to produce works that support the president and his policy initiatives. As the transcript shows, however, participants on the call—including Patrick Courrielche, the reporter who originally broke the story—could not but perceive it as an attempt to encourage artists to use their art to support the president’s agenda. Here are some choice excerpts:

I have been asked by the folks in the White House and folks in the NEA about a month ago in a conversation that we had. We had the idea that I would help bring together the independent artists community around the country. … [I]t’s clear as an independent art community as artists and thinkers and tastemakers and marketers and visionaries on this call, the role that we played during the campaign for the president and also during his first 200 some odd days of his presidency and the president has a clear arts agenda and has been very supportive of using art and supporting art in creative ways to talk about some of the issues that we face here in our country and also to engage people.

And I think all of us who are on this phone call were selected for a reason, and you are the ones that lead by example in your communities. You are the thought leaders. … And so I’m hoping that through this group and the goal of all this and the goal of this phone call, is through the group that we can create a stronger community amongst ourselves to get involved in things that we’re passionate about as we did during the campaign but continue to get involved in those things, to support some of the president’s initiatives, but also to do things that we are passionate about and to push the president and push his administration.

Buffy Wicks, Deputy Director of the White House Office of Public Engagement:

And, you know, we won and that’s exciting, and now we have to take all that energy and make it really meaningful. I’m in the White House now and what I’ve learned over these first—we just had our 200 mark on Saturday, which sounds crazy, is that it’s—that change does not come easy and, you know, when then Candidate Obama would say that it’s like, yeah, I know change doesn’t come easy, but then now that I’m actually in the White House and working towards furthering this agenda, this very aggressive agenda, I’m really realizing that, and I’m also appreciative of the way in which we did win and the strategy that the campaign shows, which is really to engage people at a local level and to engage them in the process, because we need them and we need you, and we’re going to need your help, and we’re going to come at you with some specific asks here.

After identifying health care and energy and environment as two of the four areas in which artists can use their art to encourage change (education and community renewal were the other two areas) Wicks told the group:

I know I’m throwing a lot of government stuff at you guys, so bear with me. It’s the world we live in now. We’re actually running the government.

A good way to become acquainted with the fundamental texts, arguments, ideas, and themes of the conservative movement is to delve into the short courses on conservative thought recently offered by the Intercollegiate Studies Institute at its First Principles Web journal. Each of the six short courses consists of an orientation essay that introduces the subject matter and includes dozens of hyperlinks to additional resources for the reader to explore. Each course also includes annotated syllabi of recommended readings, and a dedicated online discussion forum. The six short courses cover Western Civilization, the American Experience, Free Markets & Civil Society, America’s Security, American Conservative Thought, and Higher Education and the Liberal Arts.

In tribute to Irving Kristol, who died on Friday, The Weekly Standard is featuring on its front page Kristol’s article “The Neoconservative Persuasion” from August 2003. Kristol, of course, is considered the godfather of neoconservatism, and his views may seem idiosyncratic to other conservatives. But that he represented a strand of conservative thought there can be no doubt. One view of conservatism is that it is more a disposition than an ideology, and Kristol’s ideas seem to confirm that notion. Below are a few outtakes:

On the role of neoconservatism:

[T]he historical task and political purpose of neoconservatism would seem to be this: to convert the Republican party, and American conservatism in general, against their respective wills, into a new kind of conservative politics suitable to governing a modern democracy. That this new conservative politics is distinctly American is beyond doubt. There is nothing like neoconservatism in Europe, and most European conservatives are highly skeptical of its legitimacy. The fact that conservatism in the United States is so much healthier than in Europe, so much more politically effective, surely has something to do with the existence of neoconservatism. But Europeans, who think it absurd to look to the United States for lessons in political innovation, resolutely refuse to consider this possibility.

Neoconservatism is the first variant of American conservatism in the past century that is in the “American grain.” It is hopeful, not lugubrious; forward-looking, not nostalgic; and its general tone is cheerful, not grim or dyspeptic. Its 20th-century heroes tend to be TR, FDR, and Ronald Reagan.

On tax cuts:

This policy was not invented by neocons, and it was not the particularities of tax cuts that interested them, but rather the steady focus on economic growth. Neocons are familiar with intellectual history and aware that it is only in the last two centuries that democracy has become a respectable option among political thinkers. In earlier times, democracy meant an inherently turbulent political regime, with the “have-nots” and the “haves” engaged in a perpetual and utterly destructive class struggle. It was only the prospect of economic growth in which everyone prospered, if not equally or simultaneously, that gave modern democracies their legitimacy and durability.

The cost of this emphasis on economic growth has been an attitude toward public finance that is far less risk averse than is the case among more traditional conservatives. Neocons would prefer not to have large budget deficits, but it is in the nature of democracy—because it seems to be in the nature of human nature—that political demagogy will frequently result in economic recklessness, so that one sometimes must shoulder budgetary deficits as the cost (temporary, one hopes) of pursuing economic growth. It is a basic assumption of neoconservatism that, as a consequence of the spread of affluence among all classes, a property-owning and tax-paying population will, in time, become less vulnerable to egalitarian illusions and demagogic appeals and more sensible about the fundamentals of economic reckoning.

On foreign policy:

[T]here is no set of neoconservative beliefs concerning foreign policy, only a set of attitudes derived from historical experience. (The favorite neoconservative text on foreign affairs, thanks to professors Leo Strauss of Chicago and Donald Kagan of Yale, is Thucydides on the Peloponnesian War.) These attitudes can be summarized in the following “theses” (as a Marxist would say): First, patriotism is a natural and healthy sentiment and should be encouraged by both private and public institutions. Precisely because we are a nation of immigrants, this is a powerful American sentiment. Second, world government is a terrible idea since it can lead to world tyranny. International institutions that point to an ultimate world government should be regarded with the deepest suspicion. Third, statesmen should, above all, have the ability to distinguish friends from enemies. This is not as easy as it sounds, as the history of the Cold War revealed. The number of intelligent men who could not count the Soviet Union as an enemy, even though this was its own self-definition, was absolutely astonishing.

Finally, for a great power, the “national interest” is not a geographical term, except for fairly prosaic matters like trade and environmental regulation. A smaller nation might appropriately feel that its national interest begins and ends at its borders, so that its foreign policy is almost always in a defensive mode. A larger nation has more extensive interests.

In Arizona, private schools appear to do a better job of promoting civic values than do public schools, according to a survey commissioned by the Goldwater Institute. Critics of school choice have long contended that public schools are needed to promote the civic values on which democracy depends. But the survey firm Strategic Vision found that students attending private high schools with a tax credit scholarship are more inclined to be tolerant of those with different political opinions and are more likely to volunteer their time for their communities than are their public school peers. The survey interviewed 1,350 Arizona high school students, and found that 71 percent of tax credit students either strongly agreed or agreed with the statement: “My school teaches me to value, respect and tolerate differences in others.” Only 51.3 percent of public school students strongly agreed or agreed with that statement. The survey also found that 83 percent tax credit students either strongly agreed or agreed with the statement, “People whose views I oppose should be allowed to give a speech in my neighborhood,” compared to only 53.3 percent of public school students who strongly agreed or agreed; 83 percent of tax credit students strongly agreed or agreed with the statement, “People whose views I oppose should be allowed to run for president,” compared to only 68.4 percent of public school students who strongly agreed or agreed with the statement; and 44 percent of tax credit students reported having done volunteer work within the last year, compared to only 33 percent of public school students who said they have volunteered.

CampusReform.org is a new Web site produced by the Leadership Institute that aims to give conservative students the resources they need to fight radical Leftism on their campuses. The site allows students at every college or university to create a page of resources specifically for their school. Students can then use their school’s page to connect with other conservative students, write blog posts, report bias by Leftist professors or suppression of conservative speech on campus, organize events, review textbooks, or start on online chat.

Glenn Beck, hosted by the Evergreen Freedom Foundation, will give a talk at Safeco Field in Seattle about how to make government more accountable to the people. The Evergreen Freedom Foundation, by the way, has won some significant accountability battles over the years in Washington state. In 2007, the group took the teachers union all the way to the Supreme Court in order to force them to stop spending teachers’ union dues on political campaigns. The event with Beck begins at noon on Saturday, September 26. You can still get tickets.

A number of scholars have zeroed in on an obscure regulation called the “Recourse Rule” as being a primary cause of last fall’s financial crisis. Briefly, the Recourse Rule governed the amount of capital banks had to have on hand to cover their liabilities. Because the rule gave a 20 percent risk weight to mortgage-backed bonds (as compared to a 50 percent risk weight for individual mortgages), banks could reduce their capital and increase their profits by shifting their assets to mortgage-backed securities. The rule, in other words, induced a lot of banks to increase their vulnerability to a set of investments that turned out bad. Jeffrey Friedman, editor of Critical Review, has some important amplifications of this explanation:

We know in retrospect that the capitalists who took advantage of the Recourse Rule, such as those at Citibank, were making a mistake. But not all capitalists made this mistake, even though it was costly for them to turn down the higher profits offered by the Recourse Rule. JPMorgan, for instance, recognized the danger and escaped destruction. None of these capitalists were irrational; all were self-interested; yet they had different perceptions of how to pursue their self-interest, based on different perceptions of risk.

In relatively unregulated markets, this diversity of viewpoints is precisely what makes capitalism work. One capitalist thinks that profit can be made, and loss avoided, by pursuing strategy A; another, by pursuing strategy B. These heterogeneous strategies compete with each other, and the better ideas produce profits rather than losses. In a complex world where nobody really knows what will work until it is tried, competition is the only way that people’s endless capacity for error can be checked, and loss is the regrettable but inescapable result.

In the banking industry, however, bankers’ heterogeneous strategies were homogenized (although not entirely) by the Recourse Rule, which loaded the dice in favor of the regulators’ ideas of where risk did and did not lie. … By thus homogenizing the heterogeneous competitive process, the regulators inadvertently made the banking system more vulnerable—if, in fact, the regulators’ theory turned out to be wrong.

If we seek the sources of a systemic failure, a logical place to look is among the legal rules that govern the system as a whole. Unfortunately, being legal mandates, these rules—unlike the different strategies pursued by competing capitalists—aren’t subjected to a competitive process. So if they are based on mistaken ideas, we all suffer the consequences. That turned out to be the case with the Recourse Rule.

Contrary to popular belief, then, the crisis of 2008 is best described as a crisis of regulation—not a crisis of capitalism.

On February 2nd, Iran successfully launched a satellite into orbit using a rocket with technology similar to that used in a long-range ballistic missile. On May 20th, Iran test-fired a 1200-mile solid-fueled two-stage ballistic missile. On July 15th, Germany’s foreign intelligence service, BND, announced that Iran will be able to produce and test a nuclear weapon within six months. BND also stated that it has “no doubt” that Iran’s missile program is aimed solely at the production of nuclear warheads. On August 3rd, The Times of London reported that Western intelligence sources concluded that Iran has not only perfected the technology to build and detonate a nuclear weapon, could assemble a weapon in just six months, and could deliver the weapon on Iran’s Shebab-3 ballistic missile. Just yesterday French President Nicolas Sarkozy said: “It is a certainty to all of our secret services. Iran is working today on a nuclear [weapons] program.”

2. “It represents,” says Sally McNamara, “the shameful abandonment of two of America’s closest allies in Central and Eastern Europe, and in future, America’s allies will have cause to question the integrity and credibility of American promises.” And Helle Dale says: “Of all the days President Obama could have chosen to announce that the United States will abandon its plans for a missile defense site in the CzechRepublic and Poland, September 17 was possibly the worst he could have chosen. As any Pole could tell you, this was the date the Soviet army invaded Poland in World War II, after Nazi Germany had launched its assault on the country on September 1. Doesn’t anyone at the State Department, the Pentagon or the National Security Council engage in cultural intelligence at all?”

A senior Russian official half-jokingly told me that the U.S. steps are “birthday presents for President Medvedev and Prime Minister Putin.” What will they think of next – serenades and gifts for St. Valentine’s? Carrots and cakes ain’t policy.

After spending ten days with the leading Russian foreign policy experts one thing became blatantly clear: the Obama Administration did not – and will not — receive any quid-pro-quod for the significant concession it provided to Russia as a part of its “reset button” policy.

Russia, which faces the rising threat from Islamist militants in North Caucasus and Central Asia, wants us to believe that it provided great concessions to the U.S. by granting air and surface transit for the NATO resupply effort in Afghanistan. Yet, Lavrov correctly indicated that this was a clear case of the U.S. and Russian national interests coinciding.

In meetings I attended, both Putin and Lavrov warned against any military strikes on Iranian nuke program. Russia is refusing to support a gasoline sales embargo against the mullahs. “Russia has good relations with Iran; has very significant economic interests there. Iran never supported any Islamist terrorism [in North Caucasus], and Russia will be the last state Iran would target even if it gets nuclear weapons”, says a senior foreign policy expert who regularly advises Russian leadership.

When I asked, why President Obama needed to provide all these goodies while getting nothing in return, Lavrov and Putin said that they did not view U.S. “reset” measures as concessions. “They corrected mistakes that the Bush Administration made,” said Lavrov.

Moscow will not take a “yes” for an answer, a colleague said. All these concessions the Russians pocketed, smiled, and moved on to new demands: European security reconfiguration; additional global reserve currency which would weaken the dollar; and a strong push-back on sanctions against the Iranian nuclear program.

For more on the importance of missile defense, please visit 33 Minutes.

The United Nations formally opened its 64th session on Tuesday, and hot off the presses is a new book that reviews the United Nations system and offers ideas for reform. ConUNdrum: The Limits of the United Nations and the Search for Alternatives is published by Rowman & Littlefield and edited by Heritage Foundation fellow Brett Schaeffer. Aside from the bureaucratic bloat, the malfeasance, the hypocrisy of its human rights council, and its anti-American politics, what could be the problem with the United Nations? In his foreword, former Ambassador John Bolton identifies the source of the troubles:

The lowest-paying fifty-four U.N. member governments that were assessed 0.001 percent for the regular budget in 2007, in the aggregate, pay a whopping 0.054 percent of the total U.N. regular budget. The 128 least assessed governments combined to pay less than 1 percent of the budget. By contrast, the seventeen countries that each pay annual, regular-budget assessments of over 1 percent contributed, in the aggregate, 86.5 percent of the U.N.’s regular budget in 2007. Yet under U.N. rules each of those countries has an equal say in adopting the budget. That means that two-thirds of the General Assembly membership (128 out of 192 total member states) that pays, in the aggregate, less than 5 percent of the amount that the U.S. alone is assessed, can under U.N. rules approve the U.N. budget over the objections of the United States and the sixteen other countries that foot over 86 percent of the bill. Thus, despite the U.N. Charter’s requirement that budgetary questions must be decided by a two-thirds majority of the U.N. General Assembly, in practice the two-thirds provision has provided little practical protection to the largest contributors.

Instead, the system of assessed contributions, combined with one-country, one-vote decision making, has created a kind of “entitlement mentality” within the U.N. system over the years as governments and Secretariats routinely expect that budgets will be funded without regard to agency performance, effectiveness, transparency, or accountability. [Internal citations omitted.]

Bolton recommends getting rid of the assessment system and moving to voluntary contributions. That, he says, “would impose a stronger market incentive for U.N. programs and activities to meet their goals and justify continued funding. After all, if an activity, program, or office could not demonstrate its effectiveness, member states would be reluctant to continue to support it.”

ConUNdrum offers a lot more ideas on the U.N. role in areas ranging from human rights, to the environment, to economic development, to conflict resolution.

Two hundred and twenty-two years ago today, 39 delegates to the Constitutional Convention in Philadelphia signed the Constitution and sent it to the states for ratification. You can celebrate our nation’s founding document by learning more about it. Here are some great resources to check out:

And of course, you might want to read the Constitution, in which case you can get yourself a pocket edition of the Constitution from The Heritage Foundation; you can also get the complete text online at Founding.com.

Do you automatically publish your tweets as Facebook status updates? You might want to reconsider whether that strategy makes sense. Are your Twitter followers the same type of audience as your Facebook friends? Robert Bluey, director of online strategy for The Heritage Foundation, is a longtime Twitter user who recently decided to discontinue the automatic posting set-up in favor of customizing his postings to both Facebook and Twitter. He explains his decision:

[T]here was nothing more annoying than to see RT or @ or #hashtag in the Facebook news feed — yet I’m amazed at how many savvy people continue to do it. Months ago I began deleting my re-tweets (RT) from Facebook as soon as I published them. I also avoided using the @ in the tweets that would show up on Facebook and abandoned hashtags (#) altogether. In trying to keep my Facebook updates free of Twitter jargon, I ended up using Twitter less, particularly from my iPhone, where it wasn’t as easy to remove Facebook status updates.

This week I finally had enough. Facebook and Twitter are two different communities. The people who follow me on Twitter are much more political in nature and interested in my conservative views. My friends on Facebook date back to my youth and, more often than not, would rather hear about my family, hobbies, work, and only occasionally politics. There will still be overlap at times, of course, but there’s no reason to be duplicative.

Much has been made over the attendance at the march and rally in Washington, D.C., on September 12. Reports varied, with many on the Left clinging to an unofficial D.C. Fire Department estimate of 60,000 to 70,000. Some reports from overseas went as far as to say 2 million. However, one completely objective source of information is the number of people who rode Metro, D.C.’s subway system. Washington Metro measures and releases its ridership numbers and these numbers have been used in the past to judge the size of major events in Washington, D.C.

For a fair comparison, we looked at the Saturday after Labor Day in 2008, which is when September 12 fell in 2009. On September 12, 2009, 437,624 rode metro rail. By comparison, on the Saturday after Labor Day in 2008, 202,528 rode. The difference is 235,096. Even if nobody else came to the march—and we know they did by chartered bus and by carpool—the theory that only 70,000 people were there is off by roughly 335 percent. To take the comparison a step further, we also looked at the attendance for President Obama’s inauguration in January 2009. Conventional wisdom estimates that attendance for the inaugural was between 800,000 and 1.8 million, or an average of 1.3 million.

If you compare Metro riders on Inauguration Day 2009 to Martin Luther King Day 2008, the similarly situated federal holiday in January, then you find that approximately 975,000 additional people rode metro for the inauguration. So, if you compare 975,000 additional metro riders as a percentage of the 1.3 million who attended the inauguration and you do the same math for 235,000 additional metro riders for the 9/12 March, than at least 313,000 went downtown for the explicit purpose of marching against out-of-control government spending on September 12. This assumes a similar percentage of attendees took buses, cabs, drove in, walked, etc.

If you believe the number was 1.8 million at the Inauguration and you do the same math for 9/12, then the number is 433,000. So is an estimate of 313,000 to 433,000 attendees accurate? Well, it is certainly an unbiased and impartial start to understanding the debate over crowd size. The bottom line is that hundreds of thousands of Americans who were upset with government spending, a failed stimulus, a government takeover of health care, and a massive energy tax came with their parents, children, grandparents, cousins, college roommates, etc. to a multi-generational and peaceful family protest in Washington.

How’s the War on Poverty going? Just fine if the metric you care about is money spent. A new Heritage Foundation report by Robert Rector, Katherine Bradley, and Rachel Sheffield totes up all the spending on programs that provide means-tested assistance to those with low incomes. Some of their findings:

In fiscal year (FY) 2008, total government spending on means-tested welfare or aid to the poor amounted to $714 billion. …

Wel­fare spending was 13 times greater in FY 2008, after adjusting for inflation, than it was when the War on Poverty started in 1964. Means-tested welfare spending was 1.2 percent of the gross domestic product (GDP) when Presi­dent Johnson began the War on Poverty. In 2008, it reached 5 percent of GDP. …

If total means-tested welfare spending were simply converted into cash benefits, the sum would be nearly four times the amount needed to raise the income of all poor families above the official poverty line. …

Since the beginning of the War on Poverty, government has spent $15.9 trillion (in inflation-adjusted 2008 dol­lars) on means-tested welfare. In comparison, the cost of all other wars in U.S. history was $6.4 trillion (in inflation-adjusted 2008 dollars).

In his first two years in office, President Barack Obama will increase annual federal welfare spending by one-third from $522 billion to $697 billion. The combined two-year increase will equal almost $263 billion ($88.2 bil­lion in FY 2009 plus $174.6 billion in FY 2010). After adjusting for inflation, this increase is two and a half times greater than any previous increase in federal welfare spending in U.S. history. As a share of the economy, annual fed­eral welfare spending will rise by roughly 1.2 percent of GDP.

Under President Obama, government will spend more on welfare in a single year than President George W. Bush spent on the war in Iraq during his entire presidency. According to the Congressional Research Service, the cost of the Iraq war through the end of the Bush Administration was around $622 billion. By contrast, annual federal and state means-tested welfare spending will reach $888 billion in FY 2010. Federal welfare spending alone will equal $697 billion in that year. …

According to President Obama's budget projections, federal and state welfare spending will total $10.3 trillion over the next 10 years (FY 2009 to FY 2018). This spending will equal $250,000 for each person currently living in poverty in the U.S., or $1 million for a poor family of four.

The wind industry is getting special treatment on bird kills, reports Robert Joyce. Writing in the Wall Street Journal, Joyce notes that wind turbines kill between 75,000 and 275,000 birds per year, according to the American Bird Conservancy. Federal officials have not brought one case against the wind industry for bird kills, but they have been very busy pursuing traditional power companies for killing birds protected under the Migratory Bird Treaty Act. They’ve brought hundreds of cases in the last two decades. In one, ExxonMobil pleaded guilty on August 13 to killing 85 birds that had come into contact with crude oil or other pollutants in uncovered tanks or waste-water facilities on properties. And in July, “the Oregon-based electric utility PacifiCorp paid $1.4 million in fines and restitution for killing 232 eagles in Wyoming over the past two years. The birds were electrocuted by poorly-designed power lines.” Meanwhile, reports Joyce:

A July 2008 study of the wind farm at Altamont Pass, Calif., estimated that its turbines kill an average of 80 golden eagles per year. The study, funded by the Alameda County Community Development Agency, also estimated that about 10,000 birds—nearly all protected by the migratory bird act—are being whacked every year at Altamont.

Environmentalists want 20 percent of electricity in the United States to be produced by wind by the year 2030, which the Department of Energy says would require a 12-fold increase in wind capacity. If that goal were achieved, says Joyce, we could expect at least 300,000 birds to be killed by turbines every year.

Not enough people realize what consequences must follow if President Obama fulfills his pledge to make sure insurance companies can’t turn down applicants or charge them higher premiums because of pre-existing health conditions. In a terrific blog post, John Goodman explains that fulfilling this pledge must mean the death of consumer choice in health insurance. Summing up: If insurers can’t offer healthy people lower premiums, then nobody will buy insurance until they get sick, which would make insurance prohibitively expensive for anybody who wants it. Thus, everybody must be required to buy health insurance; and they must be required to buy the same kind of insurance. Otherwise, the healthy will select less coverage, which again will undermine the ability of insurers to offer more extensive coverage. Preventing risk-based underwriting of individuals must lead, says Goodman, to a “standard (government-defined) benefit package which all individuals are required to buy and all insurers are required to sell. People won’t be allowed to buy anything less generous and no insurer would be foolish enough to offer anything more generous.”

So if you want choices in health insurance, then you should oppose mandates that prevent health insurers from discriminating on the basis of risk.

Norman Borlaug died Saturday of cancer at age 95. His accomplishments won him a Nobel Peace Prize in 1970 and made him a target of criticism from the environmental Left for decades. What were those accomplishments? Borlaug’s research led to hardier more durable strains of wheat and rice and to better growing methods. These improvements allowed many developing countries to increase their crop yields and become self-sufficient (or even enter the world grain market) where before they had to rely on imported cereals. The development of high-yield agriculture (also called “the green revolution”) is estimated to have prevented a billion deaths from starvation. But this accomplishment didn’t sit well with the Malthusian environmental Left, which felt that increasing crop yields—and using more inorganic fertilizers to do so—would lead to larger populations and greater environmental stresses. This crowd was represented by Prof. Paul Ehrlich who said in 1968 that India would never be able to feed itself. After adopting Borlaug’s high-yield strains, India became self-sufficient in all cereals by 1974. Still, environmental activists campaigned to cut off foundation support for Borlaug’s work. They wanted to prevent high-yield agriculture being taken up in Africa, and to this day they’ve largely succeeded. Of the campaign against high-yield techniques, Borlaug stated:

Some of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They’ve never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they’d be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things.

Others have since recognized that Borlaug’s work has been good not only for people but for the environment, too. Birth rates are highest not in places with a secure food supply, but in countries where death rates are high (largely because of malnutrition) and where primitive farming methods require lots of children to provide labor. High-yield agriculture also makes it possible to grow more food on less land. In his book, The Improving State of the World, Indur Goklany estimates that without the productivity improvements that have occurred in agriculture since 1950, the world would have needed to put an additional 3.33 billion acres under cultivation. That area is greater than Brazil, India, and South Africa combined.

Borlaug’s life demonstrates that human creativity, far from producing Malthusian traps, is rather the greatest boon to both human and environmental progress. Thanks Norman.

There were probably at least 850,000 people at the 9/12 march against out-of-control government spending, says Charlie Martin who provides a range of estimates at Pajamas media. Interestingly, says Martin, the “legacy media” have reported attendance at 60,000 to 70,000 even though still pictures of the crowd marching down Pennsylvania Avenue show at least 100,000 there. But since the crowd was moving, there must have been more than that who marched down Pennsylvania Avenue. And according to the Park Service, a crowd filling the area from the Capitol to Third Street is about 250,000, and the crowd on Saturday overflowed that area. Meanwhile, 1.5 million are reported to have passed something called the “people meter” on Pennsylvania Avenue during the march.

Pretty much wherever we pointed the camera around the U.S. Capitol on Saturday, there were people protesting out-of-control government spending. We’re not going to pretend to know exactly how many attended the 9/12 march, but these pictures show that it was a big crowd indeed.

As noted, we think the rise of third-party payment is one of the reasons for rising health care expenditures. But even if reforms fixed the bad incentives (and such reforms are always worth doing), it might still be the case that health care expenditures would continue to rise as a proportion of national income. If that is the case, then a program of trying to “bend the cost curve downward” runs the risk of being an exercise in forcing Americans to forgo health care that would be worth having. Two different scholars writing recently at The American make compelling points for why we should expect rising health care costs regardless of reforms.

The long-term income elasticity of the demand for healthcare is 1.6—for every 1 percent increase in a family’s income, the family wants to increase its expenditures on healthcare by 1.6 percent. This is not a new trend. Between 1875 and 1995, the share of family income spent on food, clothing, and shelter declined from 87 percent to just 30 percent, despite the fact that we eat more food, own more clothes, and have better and larger homes today than we had in 1875. All of this has been made possible by the growth in the productivity of traditional commodities. In the last quarter of the 19th century, it took 1,700 hours of labor to purchase the annual food supply for a family. Today it requires just 260 hours, and it is likely that by 2040, a family’s food supply will be purchased with about 160 hours of labor.

Consequently, there is no need to suppress the demand for healthcare. Expenditures on healthcare are driven by demand, which is spurred by income and by advances in biotechnology that make health interventions increasingly effective.

[I]t is much more difficult to increase productivity in services—the productivity of labor, that is—than it is in manufacturing. … we cannot make a symphony orchestra more productive by asking them to play faster: add to this the well-known idea … that average wages in an economy are determined by average productivity, and it is possible to construct an argument that services will become more expensive relative to manufactures over time.

Improving the productivity in manufacturing (or indeed farming) means that average productivity has gone up: thus we expect average wages to rise. But we have reduced the use of labor in manufacturing a great deal more than we have in services. Thus, the costs of the labor component of services will rise relative to those embedded in manufactured goods. Another way of putting this is that services will have a higher inflation rate than the average, because that average is, of course, of all sectors of the economy. This is why it should surprise no one that both medicine and higher education, both of which largely rely upon stonkingly large amounts of trained labor, have higher inflation rates than other parts of the economy. Yet it still does seem to surprise many, including an alarmingly large number of policy makers.

Worstall worries that policymakers will eventually attempt to find savings in health care by curbing the use of high-tech medicine, even though technology offers the best hope of overcoming medicine’s “cost disease.” What should worry Americans about such a scenario is the possibility that the breakthrough medical technology that was going to save their lives 20 years from now won’t be there at all.

In his speech last night, the president made a few problematic statements here and there, says Conn Carroll:

1. OBAMA: “There are now more than thirty million American citizens who cannot get coverage.”

THE FACTS: On August 8th, President Obama said: “Reform is obviously essential for the 46 million Americans who don’t have health insurance.” So did 16 million uninsured people just disappear in the span of two months? Not quite. The problem is that the 46 million number was always highly misleading and the new 30 million number isn’t much better. According to an analysis based on the 2007 Census data there were 45.7 million uninsured people in the U.S. in 2007. But 9.3 million of those were non-citizens. Another 6.4 million actually are enrolled in Medicaid but mistakenly tell the Census they have no health insurance. Another 4.3 million are eligible for Medicaid or SCHIP but have not signed up. Another 10 million have no insurance, but also make more than 3X the poverty level. That means only 15.6 million U.S. citizens with incomes below 300% of poverty and that are nor already eligible for taxpayer-subsidized health insurance, are uninsured.

2. OBAMA: “First, if you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. Let me repeat this: nothing in our plan requires you to change what you have.”

THE FACTS: First, the statement is just false. According to the America’s Health Insurance Plans (AHIP) 4.5 million Americans are covered by Health Savings Accounts. H.R. 3200 gives the Secretary of Health and Human Services the authority to make such plans illegal. In both the House Energy and Commerce Committee mark up and the House Ways and Means Committee mark up, Republicans offered amendments that would have guaranteed Americans’ right to keep their Health Saving’s account. All of these amendments were defeated by Democrats on their respective committees. These 4.5 million Americans will lose their insurance under Obamacare

If you don’t have 50 minutes to listen to a political speech, but still want to know what’s wrong with health care today, the graphic below is for you:

When consumers don’t bear directly the costs of their consumption, they will consume more than if they had to pay themselves. The incentives facing health care consumers today are much like those facing a group that decides to split its restaurant bill evenly regardless of what anyone orders. Nobody will save much money by ordering a grilled cheese sandwich instead of a steak, and nobody will have to pay that much more if they order steak instead of a grilled cheese sandwich. Under such a system, the incentive to spend wisely is lessened, and the result is that more people order steak.

So go ahead, order that MRI; everybody else is!

And as “spending other people’s money” has increased in health care, so has health care spending increased faster than national expenditures. If we want to fix this problem, we need less third-party payment, not more. The Democrats’ health care plans, however, promise new government health care subsidies. According to estimates by Arther Laffer, Donna Arduin, and Wayne Winegarden, spending $1 trillion on new health care subsidies over the next ten years (approximately what various plans in Congress would do) would increase health care inflation by 5 percentage points.

There’s been alotwritten on the claim that Medicare delivers health care more efficiently than private health insurance—which, if true, means by inference that a “public option” available to all is a reform that could lower health insurance prices for many. A key point made by a number of commentators in this debate is that promoters of the public plan have conflated low administrative costs with overall plan efficiency. Having a low ratio of overhead to premiums doesn’t mean that overall costs are kept in check or that the patient is receiving value for the dollars spent on his care. In fact, overhead isn’t just something that insurers arbitrarily tack onto your health insurance bill; it plays a key role in keeping premiums down. Merrill Matthews and Meredith Matthews point out in their article in the new issue of The Insider that Medicare and Medicaid spend much less money than do private insurers on screening claims to identify fraud. Fighting fraud costs money and is part of overhead, but if insurers didn’t fight fraud, then premiums would have to be higher. Medicare and Medicaid’s lack of focus on fraud makes their overhead costs appear lower, which promoters of the public plan have now turned into a virtue. As Matthews and Matthews put it:

Ponzi schemer Bernard Madoff defrauded people out of some $50 billion, and the public and media went (justifiably) berserk. Medicare has $60 billion of waste and fraud each year, and the president and the Democratic leadership in Congress want to make it a health insurance model for the country.

Rather than trying to fix private health insurance by expanding public insurance, Congress and the President ought to be trying to fix public insurance by learning from the private sector. Unlike Medicare, private insurers screen claims before paying, rather than relying on recoveries and court-ordered judgments. As a result, fraud against private insurance accounts for only about one and a half percent of claims. The government itself thinks fraud in Medicaid accounts for 10 percent of program costs. If that ratio holds true for Medicare as well, then fraud is costing taxpayers nearly $80 billion per year. That’s a huge chunk of change. Why is fighting fraud against government programs not the focus of health care reform?

The Summer 2009 issue of The Insider is just out. For those wondering where the tea party movement goes from here, we strongly recommend our cover story. Being against the current program isn’t enough. A movement needs to be for something. Matthew Spalding makes the case for self-government, which depends very much on many people rediscovering the core principles of America’s Founding—and understanding how the progression of ever-bigger government threatens those principles. Readers interested in more on this theme should look for Dr. Spalding new book, We Still Hold These Truths: Rediscovering Our Principles, Reclaiming Our Future, which is set to be released in October by ISI Books. Here is the editor’s note running down the articles from the new issue:

Health care reform, with a 10-year price tag in excess of $1.5 trillion, is the proximate cause of much citizen infuriation today, but it is not the only cause. The entire program of bailouts, takeovers, and stimulus spending has the country rankled. And it is right to be rankled.

Much like the Romans of 49 BC who understood that Julius Caesar’s first steps on the south bank of the Rubicon meant Rome was about to be transformed forever, Americans today seem to sense that recent policy choices threaten to change America into a different kind of country. The question that concerns many tea partiers and town hall goers is: At what point will the accumulation of new government powers irrevocably transform America from a self-governing republic into a nation of servile favor seekers?

Can the trend be reversed? A good first step is to ask every member of Congress the question one town hall attendee posed to Senator Arlen Specter: “What are you going to do to restore this country back to what our Founders created according to the Constitution?”

One thing to keep in mind as you listen to tonight’s speech on health care by President Obama is that conservatives and libertarians have been pushing for more competition in health care for a long time—long before “more competition” became a talking point for ObamaCare. The way to get more competition in health care is to get the government out of the way and let insurance companies and health care providers compete, not to increase regulations that force them all to offer the same thing to every patient. In our own database, we have over 900 health care-related studies outlining free market solutions for health care reform. Perusing the database, we find, for instance, a 2004 paper from Heritage’s Nina Owcharenko urging Congress to be bolder and tackle the real structural problems in our health care system. Alas, Congress didn’t do that in 2004, but Owcharenko’s advice is still good:

1. Fix the tax treatment of health care. The current federal tax code provides unlimited tax relief for the purchase of health insurance, but only through the place of work. As it turns out, lower-wage workers, particularly those who work in small firms, who need help the most, get less tax relief than high-wage workers. Moreover, if workers in small firms go outside of the place of work to buy a health plan, they must do so with after-tax dollars, which often makes the cost of a plan prohibitive.

In the short term, offering low-income individuals and families a refundable, advanceable tax credit, as proposed by the President and several Members of Congress from both parties, would enable individuals to obtain their own health care coverage and further promote the efforts to allow businesses, especially small businesses, to provide financial assistance through a defined contribution approach.

In the long term, replacing the employer-based tax exclusion with a national system of refundable health care tax credits, with more help going to individuals and families with higher health care costs and/or lower income, is the better policy option. It would be more effective way to allocate scarce federal resources and undertake fundamental reform the health care system.

2. Encourage the states to adopt consumer-friendly health insurance markets. Policymakers should also consider ways to encourage states to design a consumer-friendly marketplace. Since states currently regulate the individual and small group insurance market, it is a practical option for states to establish these markets where consumers can shop for coverage that best suits their needs.

And as an expansion on point number two, consider this passage from J. Patrick Rooney and Dan Perrin:

Individual health insurance rates differ among the states. State mandates are driving up the cost of health insurance unmercifully in states like New Jersey and New York. Nothing would help the consumers in these states more than letting them go beyond state borders to buy the insurance coverage they want for the price they can afford.

The beauty in this approach is that we don’t need to change the laws in New Jersey or New York or any other state. These states can continue to regulate the insurance companies that market in their states as much as they want to. And if the people of these states want to pay for all the benefits mandated by their state, they’re free to do so. But if the citizens want to pursue other options—get more choices and better prices—then they would be free to do that as well. …

In the current monopolistic environment, millions of Americans are afraid to move, switch jobs, or start their own businesses for fear of losing their health insurance. That fear would go away if they were allowed to shop nationwide for policies that would follow them wherever they went.

The 2009 Higher Education Price Index was released today, and it shows a 2.3 percent increase in higher education prices for July 2008-June 2009. That doesn’t sound too bad—until you remember that we’ve been having a recession. Between August 2008 and July 2009, overall consumer prices fell 2.1 percent—the largest 12-month decline in nearly 60 years. The decline was driven by collapsing energy prices (down 28 percent), a factor which also explains most of the moderation in higher education inflation: The energy cost component of the Higher Education Price Index shows a drop of 15 percent for fiscal year 2009. Administrative salaries, meanwhile, increased 5.4 percent.

So how does higher education get away with increasing prices during a recession? In a 2008 report for the Center for College Affordability and Productivity, Andrew Gillen explains it this way:

Part of the problem is that public policy attempts to subsidize attendance for too many students on the assumption that this will increase access to higher education. These subsidies, intended to make college more affordable, are ineffective because schools maximize prestige rather than profit, and because the lack of any measure of their output rules out normal price competition. These characteristics imply that subsidies will not lower the financial burden of higher education for students, as colleges and universities raise prices to exploit the increased ability to pay that the subsidies bring about.

Unions advertise generous pension plans to recruit new members, but a new report from the Hudson Institute says many collectively bargained pension plans are not funded adequately. In fact, say the report’s authors, Diana Furchtgott-Roth and Andrew Brown, workers with non-union pensions are much more likely to see the pension benefits they’ve been promised than are union workers.

Using data that all pension plans must provide to the Internal Revenue Service and the Department of Labor, Furchtgott-Roth and Brown calculated the extent of plan funding—i.e., whether a plan’s current assets are sufficient to cover its current liabilities. Overall, they found that non-union plans are 97 percent funded, while collectively bargained plans are only 86 percent funded. Further:

Among large plans – plans with 100 or more participants – 35 percent of non-union plans were fully funded, as compared to 17 percent of fully funded union plans. … [T]he Pension Protection Act of 2006 considers funds with less than 80 percent of their needed assets to be in “endangered” status. While 86 percent of non-union funds had 80 percent or more funds needed to pay expected costs, only 59 percent of union funds met the funding threshold. Similarly, while only 1 percent of non-union plans had less than 65 percent of required assets, also called “critical” status in the 2006 Act, 13 percent of union plans were critical.

Union leaders may see expanding current benefits as more likely to help their re-elections than protecting benefits already promised, but they are doing just fine looking after their own interests: On average, rank-and-file pension plans had 79 percent of funds needed to cover their obligations, while officer plans were 93 percent funded, according to Furchtgott-Roth and Brown.

The solution to this problem is for workers to hold their union leaders accountable for addressing plan funding, but the so-called “Employee Free Choice Act” holds out the possibility of a Ponzi-scheme solution. Through the mandatory arbitration process that the bill would create, a firm’s workers could be forced to join an under-funded multi-employer pension plan. That would boost the plan’s funding ratios at the expense and risk of the new workers forced into the plan.

So President Obama’s back-to-school speech will be the standard-issue “study hard and make the most of your future” discussion—the sort of innocuous pep talk that kids should hear from their parents first and foremost. Meanwhile, pundits will likely focus on whether conservative critics overreacted in accusing the President of planning to indoctrinate the kids with progressive ideology. There’s another lesson, however, which Neal McCluskey notes at Cato-at-Liberty:

Americans are very diverse – ideologically, ethnically, morally, religiously – but they all have to support a single system of government schools. As a result, they are constantly forced to fight to have their values and desires respected, and the losers inevitably have their liberty infringed. In this case, reasonable people who want their children to hear the President must fight it out with equally reasonable people who do not want their children to watch the speech in school. It’s a situation completely at odds with a free society, but as we have seen not just with the current conflict, but seemingly endless battles over history textbooks, the teaching of human origins, sex education, and on and on, it is inevitable when government runs the schools. Which is why the most important lesson to be learned from this presidential-address donnybrook is that Americans need educational freedom. We need universal school choice or crippling conflicts like this will keep on coming, liberty will continue to be compromised, and our society will be ripped farther and farther apart.

During their time in power, the 23 worst dictators in the world have received $144 billion (2006 dollars) in official development aid from the countries of the Organization for Economic Cooperation and Development. Christopher Coyne and Matt Ryan calculated the aid given to the world’s worst dictators—as judged annually by Parade magazine (2006 and 2007 editions combined)—for a recent article in The Independent Review.

So has development assistance helped to bring about any political reform? A lot of the thugs on the Parade list have been around for a while. The list includes Cuba’s Fidel Castro ($797 million), Egypt’s Hosni Mubarak ($61 billion), North Korea’s Kim jong-Il ($891 million), Libya’s Muammar al-Qaddafi ($171 million), Sudan’s Omar al-Bashir ($7 billion), and Zimbabwe’s Robert Mugabe ($7.1 billion). “In sum,” write Coyne and Ryan, “the answer to the question ‘Can foreign aid buy a liberal society?’ is a resounding no.”

Mises’s work on rational economic calculation provided the decisive argument against socialism, but it also explains the foundation of the market order. The free market enables calculation, socialism makes it impossible, and interventionism distorts it. Without private property, freedom of contract, monetary stability, and fiscal responsibility, the process of rational economic calculation is thwarted.

Adam Smith articulated the idea of the invisible hand, but it was Mises who explained how the market economy actually works. Human Action is Mises’s fullest and finest statement of that explanation.

To put it bluntly, Human Action is the greatest work in economics in the twentieth century. It is the treatise in economics.

Connecticut has so far received over $1 billion from the 1998 Master Settlement Agreement with the tobacco companies. Yet, according to Connecticut’s Yankee Institute, the state has used just $23 million of that money on efforts to prevent smoking, help smokers quit, or treat those who suffer from smoking-related health problems.

In the mid-1990s, Connecticut, with then-attorney general Richard Blumenthal, was at the forefront of a group of states that sued the four biggest tobacco companies. The states argued that the companies’ marketing practices were responsible for increasing state Medicaid expenses.

Of course, if the state had spent the money getting people to quit smoking, then it could not have succeeded in tripling its cigarette tax revenue since 2002. Over the same period, notes the Yankee Institute, the state’s tobacco tax has quadrupled.

Congratulations to the Illinois Policy Institute, winner of the latest SPNovation award for its Web site TweetIllinois.org. The State Policy Network’s SPNovation award recognizes particularly innovative work done by one of its member think tanks. TweetIllinois.org provides a central location for Illinois constituents to engage their legislators with the social networking platform Twitter. TweetIllinois.org gathers the Twitter feeds of 28 Illinois representatives and senators, plus three legislative caucuses, allowing constituents to find “tweets” from their representatives in one place, and to send messages back to them.

Says John Kramer, SPNovation judge and Vice President for Communications at the Institute for Justice:

The Illinois Policy Institute demonstrated one of the most-powerful uses for Twitter. No, it isn’t letting all your followers know how much you are enjoying your soy latte, it is giving citizens real-time insight into the work of the state legislature through their TweetIllinois.org site. This enables the public to better follow legislative matters and weigh in with their own two cents … hopefully pushing legislation closer to the ideals of freedom we all advance.

The Environmental Protection Agency, according to a report by Marlo Lewis at the Competitive Enterprise Institute, is planning to exempt small businesses from its plans to regulate carbon-dioxide emissions under the Clean Air Act. There’s just one problem with this plan, which is intended to diffuse political opposition to new regulations: It’s illegal. According to news reports, EPA has sent a draft proposed rule to the Office of Management and Budget that raises the emission threshold for regulating facilities. Under the proposed rule, the requirements to obtain emission permits and incorporate control technologies would fall only on new facilities expected to exceed 25,000 tons of carbon dioxide emissions per year. But the law establishes the threshold as 250 tons per year.

The plan, notes Lewis, is a tacit admission that the Clean Air Act as written is an inappropriate tool for regulating greenhouse gases because it would wreak havoc on the economy:

Whereas only large industrial facilities have a potential to emit 250 [tons per year] of air contaminants such as sulfur dioxide or particulate matter, an immense number and variety of entities – office buildings, hotels, big box stores, enclosed malls, small manufacturing firms, even commercial kitchens – have a potential to emit 250 [tons per year] of CO2. A September 2008 report commissioned by the U.S. Chamber of Commerce estimates that 1.2 million buildings and facilities – most of them currently unregulated under the [Clean Air Act] – actually emit 250 [tons per year] of CO2. All would be vulnerable to new [pre-construction] regulation, controls, paperwork, penalties, and litigation.

According to EPA estimates, obtaining a permit under the Clean Air Act’s pre-contruction regulations costs the average company $125,120 and 866 hours of work. If, because of the economic costs involved, the EPA can’t overcome political opposition to its plans without actually violating the Clean Air Act, then it is time for Congress to reclaim its legislative responsibilities in this area, amend the law, and make sure that unelected bureaucrats do not have the power to impose economy-killing taxes.

“No longer can it be argued that ‘global warming’ was, is, or will be any sort of global crisis,” writes Christopher Monckton, in a recent issue of the Science & Public Policy Institute’s Monthly CO2 Report:

The global surface temperature record, which we update and publish every month, has shown no statistically-significant “global warming” for almost 15 years. Statistically-significant global cooling has now persisted for very nearly eight years. …

More significantly, the ARGO bathythermographs deployed throughout the world’s oceans since 2003 show that the top 400 fathoms of the oceans, where it is agreed between all parties that at least 80% of all heat caused by manmade “global warming” must accumulate, have been cooling over the past six years. That now-prolonged ocean cooling is fatal to the “official” theory that “global warming” will happen on anything other than a minute scale.

Not only in the oceans but also in the tropical upper atmosphere, real-world measurements are showing up the scaremongers’ computer models as useless. All of the models predict that at altitude in the tropics “global warming” should have happened at thrice the surface rate. But half a century of measurement has shown that that warming has not happened either. That, too, is fatal to the “official” notion.

… Professor Richard Lindzen of MIT has just published a paper – arguably the most important ever to be published on “global warming” – that plots real-world changes in outgoing long-wave radiation, as measured by the ERBE satellite system, against real-world changes in global mean surface temperature. …

Observed reality is entirely different from what 11 of the UN’s models predict. Instead of 6 F warming in response to a doubling of atmospheric CO2 concentration, only 1 F can be expected, because nearly all the radiation that should be trapped in the atmosphere is escaping to space. The scare is truly over.

What schools are the safest? In the District of Columbia, violence and property crimes are far more prevalent at public schools than at either charter schools or private schools, according to an analysis of 911-call data. The Lexington Institute and The Heritage Foundation obtained the data by submitting a Freedom of Information Act request to the D.C. Metropolitan Police Department. Lexington/Heritage researchers found that in the 2007-2008 school year there were 1.9 violent incidents at traditional public schools for every 100 students enrolled at those schools. There was one murder at D.C. public schools in 2007-2008. At charter schools, by contrast, there were only .08 violent incidents per 100 students, none of which was a murder. For private schools the figure was 0.16 violent incidents per 100 students, again with no murders. The disparity in property crimes during the 2007-2008 school year was also large: Traditional public schools had 2.9 property crimes for every 100 students, while charter schools had only .1 and private schools had .77.

Fortunately, enrollments at D.C. charter schools are increasing relative to traditional public schools, but there are still waiting lists. It would also be helpful if the Obama administration would reverse its decision to rescind 216 scholarships to students who had been accepted into the D.C. Opportunity Scholarship Program. The threat of parents opting out of D.C. public school might not solve every problem with the school system, but it surely can’t hurt to make school administrators feel like they have to compete to keep their students.

We keep hearing that the idea of a public plan is to create more competition with private health insurers. Yet, as Joseph Antos and Jeet Guram note in a recent column at The American, the House health care bill creates a health insurance exchange that diminishes competition by imposing regulations on insurance plans that are even stricter than those currently imposed by the states. How are those state regulations working? Antos and Guram write:

State insurance regulations redistribute income in perverse and nontransparent ways. A study of the California insurance market by Rand economist Dana Goldman and colleagues found that the state’s community rating policy led to “large unintended transfers of wealth from poorer, rural communities to urban, wealthier communities.” People in high-income urban areas spend more on healthcare than those in low-income rural areas, and premiums would adjust accordingly in the absence of rating rules. Under community rating, though, premiums are not permitted to reflect variations in the use of health services across local markets, so the extra costs incurred in high-use areas are borne equally across the pool of insured individuals. Tighter rating rules—even if they permit some premium variation across geographic areas, as proposed in bills currently before Congress—shift more cost to young, healthy individuals, who become even less likely to buy insurance unless they are forced.

Bradley Herring of the Johns Hopkins Bloomberg School of Public Health and Mark Pauly of the University of Pennsylvania’s Wharton School found some evidence of increased numbers of uninsured in states with both community rating and guaranteed issue compared with states having no such regulations. The loss of low-risk individuals who drop coverage in response to regulation-induced higher premiums is greater than the gain of high-risk individuals who buy coverage made less expensive by the regulation.

Mandated benefits also raise the cost of insurance, making coverage prohibitively expensive for some consumers. With additional mandates, individuals purchasing their own insurance face higher premiums or coverage that requires greater out-of-pocket payments. Workers who receive coverage through their employers pay the cost of mandated benefits through lower wages. An analysis by Gail Jensen of Wayne State University and Michael Morrisey of the University of Alabama School of Public Health concludes that “there is clear evidence that the increase in numbers of uninsured Americans can be partly tied to mandates.”